It’s been a busy week. The oil price dropped into the $30s, which prompted a number of company announcements, some credible, some not. The worst of them also took the opportunity to blame their misfortunes on the Corona-virus.
Starting off, RockRose Energy (RRE) was hammered on Monday, “closing the gap” from its last pre-suspension price. On Tuesday, it confirmed it was “debt-free with net cash of £272.1 million (equivalent to £20.75 per share),” more than double the current share price. Jadestone Energy (JSE) confirmed “the business is resilient and expected to generate positive operating cashflow in 2020, even at oil prices below $30 a barrel.” In similar vein, Trinity Exploration & Production (TRIN) confirmed their “operating break-even has consistently been below $30 a barrel in all periods since the new management’s measures took effect in 2016.”
Caspian Sunrise (CASP) knows all about low oil prices. Although restrictions have relaxed somewhat of late, it’s used to having to sell most of its production at a special domestic price per barrel, currently $17.82. An export price in the $30s still looks good by comparison to a long time low cost producer. The current oil price certainly doesn’t look good for Tullow Oil (TLW), though, whose final results disclosed a free cash flow breakeven of around $45 a barrel. Its shares have collapsed from a high of over 250p last year to just 10p last week. Premier Oil (PMO) has a similar problem. Its cash flow breakeven price is stated to be “under $50” a barrel and this includes the benefits of the hedging programme. Its shares also fell to 10p last week, having been over 120p just two months ago.
With its share price having collapsed from 1.7p last year to 0.3p last week, Reabold Resources (RBD) also jumped on the oil price/market volatility/Coronavirus RNS bandwagon. No matter how much sand they throw in investors’ eyes, the issue really is will they even recover their investments in California and Romania? Yet this “proven track record” of one of the RBD co-CEOs (£600,000 a year each for this pair) apparently “will prove invaluable” to Europa Oil & Gas (EOG), which nicely illustrates the alternative business reality which prevails in the AIM/small cap sector. On that subject, Mosman Oil & Gas (MSMN) didn’t miss the opportunity either to blame in advance all the current events for its upcoming bad news. I’ll add Ascent Resources (AST) to this group. Now run by two failed AIM company directors, investors perhaps don’t think they’re going to be able to “perform” in this type of market and of the £800,000 supposedly raised, only £500,000 was actually paid over. Hopefully, it will cover their salaries for a month or two.
There was a better quality announcement from Touchstone Exploration (TXP), who reported that the Cascadura well tests had delivered a combined average of over 10,600 barrels of oil equivalent per day. Good news from UK Oil & Gas (UKOG) too, who announced both the flow of dry oil to the surface as a result of their water shut off programme and that Horse Hill has been granted long-term production consent. This will enable net recoverable reserves to be allocated and also permit UKOG to enter into long-term field operations contracts which can help reduce operating costs below $19 per barrel, making the field more profitable even at current low oil prices.
South American producer/developer, PetroTal (PTAL) took a hammering. It’s 2020 capital program is based upon $60 oil. They issued news on Tuesday stating that “given the strong relationship PetroTal has with its key contractors, the Company has agreed to manage payments with a number of its contractors, allowing for ongoing operation of the contractors’ crews.” In other words they don’t have the cash now to pay them. Another one without enough cash, Bahamas Petroleum Company (BPC), announced the possible execution of a possible convertible loan note agreement deferred to 15 April, perhaps 15 May. In the meantime, the possible CLN holders who were already granted options, exercised at 2p and, I guess, sold them for a nice profit. Now, BPC is announcing well delay and blaming it on the Corona-virus. The reality of course is they don’t have the funding to drill. Let’s see how oil in the $30s works for these two. I reckon we could be seeing placings by both of them soon.
Baron Oil (BOIL) announced the completion of its £2.5 million placing at 0.1p per share. The proceeds will be used to fund Baron’s share of the ongoing work programme in Timor-Leste, the drilling of the onshore El Barco-3x well in Peru, and to provide additional working capital. Tower Resources (TRP) managed to get away a £500,000 placing at 0.375p just in the nick of time. Now, lets see if the first farmee provides proof of funds this month and whether the second one signs up. They may well do since Tower says it’s comfortable in the lower oil price environment and still believes that the Thali license can earn excellent returns. Solo Oil (SOLO) announced the return of the ONE-Dyas deposit. Now, they’re confident they have sufficient cash resources to meet current firm budgeted commitments within the existing portfolio of assets in Tanzania, and to cover general working capital needs for the remainder of 2020.
Egdon Resources (EDR) announced that the subsurface review of their eastern Humber Basin licences has identified a new low-risk near-field exploration opportunity, which can be targeted by drilling from the current Keddington location. This presents a number of low-risk/low-cost drilling opportunities. Union Jack Oil (UJO) has an even larger interest than EDR in these now and announced it’s also expecting news during the remainder of Q1 and Q2 in respect of the extended well test at West Newton A-2 and the commencement of site works in preparation for the drilling of the West Newton B-1 well. They also confirmed that they’re fully funded for drilling. Meanwhile, 88 Energy (88E) confirmed the Charlie-1 surface hole is complete and they are commencing drilling the production hole. Now we wait for the important announcements from the only company currently drilling a potentially transformational well.
Longboat Energy (LBE) announced a market update. They believe that if the recent fall in the oil price is sustained, it will provide an increasing number of material and attractive opportunities. They expect transaction valuations to decrease and thus potential returns to shareholders to grow significantly. Cluff Natural Resources (CLNR) remains confident too. It’s in a position of relative strength with £13.3 million cash and remains funded for its share of the Selene and Pensacola wells plus its working capital requirements through to the end of next year. Independent Oil & Gas (IOG) also delivered reassurance. Work on its Key Core Project Phase 1 is proceeding to plan and it is fully funded to cash flow from its proven gas resource base.
Now, if you feel you’ve had a bit of an awakening this past week or two with the sharp market moves, it might be time for my fact based trading course, which really will open your eyes. It vastly expands on some of the principles I expound here and provides information that most will never have heard before.
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I’ve been involved in the markets for a long time. I bought my first shares in the 1970s and I’ve worked in the financial sector since the early 1980s. My particular knowledge is of the stock markets and I’ve been actively involved in these, both in the UK and the US for over 40 years from both sides of the fence. I’ve also had significant involvement in the oil and gas industry along the way, from drilling wells to negotiating farm-outs to majors.
It’s not theory in this course, rather how it all actually works in the real world, keeping it practical and realistic, so that everyone can use the information for their own advantage regardless of the level of their trading or investment.
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The author may hold one or more investments in one or more of the companies mentioned so this post cannot be viewed as independent research. This post does not constitute investment advice or a recommendation to buy or sell and may be incorrect or outdated.